BIS flags bubble-like conditions in gold, US equities

Retail investors are helping push gold and US stocks into bubble territory, raising the risk of a sharp reversal, the Bank for International Settlements’ (BIS) warns in its quarterly review. BIS pointed to signs of exuberance — including rapid price appreciation, elevated valuations, and media hype — with gold up 60% YTD, its strongest performance since 1979, and S&P 500 seeing annual gains of 17% while Nasdaq is up 22%.

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Institutional pulls back, retail all in: Retail investors accounted for most of the inflows into gold and US equity funds over the past three months, while institutional investors either pared back or held steady — a dynamic the BIS says could heighten volatility if herd behavior triggers fire sales.

A double whammy: This is the first time in at least five decades that equities and gold have hit bubble indicators simultaneously, the bank noted. While gold eased to USD 4.2k this week from an October record of USD 4.4k per oz, inflows into gold ETFs are set for a record year.

Central bank buying of gold — traditionally a safe haven — to hedge against a weak USD, inflation concerns, and debt worries have all given the rally a boost. The concern? Bullion has a history of boom-bust cycles when subsequent corrections erased gains by up to 30%.

On equities, the bank warned that big tech-led gains — fueled by AI enthusiasm — have pushed valuations to stretched levels, heightening the risk of a disorderly correction with broader market spillovers.

Still, Wall Street analysts expect the S&P 500 to extend its rally into 2026 and gain around 10%, with big tech leading gains despite concerns over high AI spending, the Financial Times reported elsewhere. Analysts cited supportive fiscal policy, potential Fed rate cuts, and gains from AI deployment.

We dove into why the AI hype may be masking underlying risks of an AI bubble recently, after skeptics warned the rally rests on short-lived GPU infrastructure and extended depreciation schedules, raising the risk that reported revenues overstate underlying economics. Investor Michael Burry has reportedly placed a USD 1.1 bn short against Nvidia and Palantir, a sign that a mass write-down could be incoming.

MARKETS THIS MORNING-

Asian markets are a sea of red this morning, as Chinese inflation rose to its highest since February. Hong Kong’s Hang Seng was down 0.6%, while China’s CSI 300 lost 0.8%. Over on Wall Street, futures are hovering near the flatline after US indices logged minor changes yesterday, with the S&P down marginally and the Nasdaq up 0.1%.

THE CLOSING BELL: TADAWUL-

The TASI rose 0.7% yesterday on turnover of SAR 4.0 bn. The index is down 11.1% YTD.

In the green: NCLE (+8.1%), Saudi Re (+4.9%), and YC (+4.4%).

In the red: Aljazira Reit (-2.4%), Derayah Reit (-1.8%), and Qacco (-1.8%).

THE CLOSING BELL: NOMU-

The NomuC closed flat yesterday on turnover of SAR 16.2 mn. The index is down 24.0% YTD.

In the green: Sign World (+15.7%), Time (+6.6%), and Hamad Bin Saedan Real Estate (+5.9%).

In the red: Meyar (-10.0%), Sahat Almajd (-5.5%), and Leaf (-5.1%).

CORPORATE ACTIONS-

The Saudi Industrial Investment Group’s board greenlit a SAR 167.1 mn dividend payout for 2H 2025 at SAR 0.25 apiece, it said in a filing to the bourse yesterday. The distribution date is set for Tuesday, 30 December.